Bonds Flat After Mixed Data On Confidence, Home Prices, Durable Goods

By Michael Aneiro

Treasury bonds posted some early gains Tuesday morning but have given those back lately amid another mixed bag of economic data. First the Commerce Department reported that durable goods orders surged by 22.6% to $300.1 billion in July, but that gain was fueled by an outsize 318% jump in aircraft sales, and if you strip out the transportation sector then orders actually fell by 0.8%. After that, the latest Case-Shiller home price index showed an unexpected 0.2% month-over month drop in June. Then the Conference Board just reported that consumer confidence rose in August to 92.4 from 90.3 in July.

All of that has left Treasury yields pretty close to where they started the day, with the current momentum post-consumer confidence reading heading slightly upward. The 10-year Treasury note is currently up 1/32 in price to yield 2.386%, per Tradeweb data, while the 30-year bond is down 1/32 to yield 3.138%.

So goes the story of this economy: headline strength masking underlying weakness…. Aside from a surge in aircraft orders accounting entirely for the headline gain, business investment and all other sub-categories of orders showed weakness at the start of the third quarter, suggesting waning momentum in investment. While aircraft and transportation orders in general tend to be volatile month-to-month, the underlying trend in business investment is much less choppy and appears to be simply holding steady, certainly not indicative of the upward trajectory expected by many who forecasted 3-4% growth in the economy as far as the eye can see. Business are clearly still hesitant to invest in new equipment, structures and as we know from months of lackluster labor reports, full-time employees.